Canada manufacturing activity expands in June after four-month slump

OTTAWA (Reuters) - The Canadian manufacturing sector perked up in June, showing growth for the first time in five months as new business orders and employment improved, data showed on Thursday.

Production Associates inspect cars moving along assembly line at Honda manufacturing plant in Alliston, Ontario March 30, 2015. REUTERS/Fred Thornhill

The RBC Canadian Manufacturing Purchasing Managers’ index (PMI), a measure of manufacturing business conditions, rose to a seasonally adjusted 51.3 last month from 49.8 in May.

A reading above 50 shows growth in the sector, but the index had been below that threshold for the last four months. June’s reading was the highest level of the year.

The improvement illustrated the lift manufacturers saw from gains in the U.S. economy and the depreciation in the Canadian dollar, said Craig Wright, chief economist at RBC.

“As we move through the summer months, we expect a trend improvement in the level of activity in the manufacturing sector,” he said.

The report was a potentially welcome sign that the economy could regain momentum in the second quarter after contracting in the first three months of the year. Data earlier this week showed growth declined in April, boding poorly for a second-quarter pick up.

Firms cited stronger export demand as helping to drive the rebound in business conditions. The new export orders index rose to 52.0, its highest level since November, from 50.1. The overall new orders index also gained.